Dollar's rally pauses for now but the positive bias remains in place

General market theme
The US Dollar has been in focus for the past couple of days on the back of the recent Fed minutes from their last meeting on monetary policy that revealed that June is considered a “live meeting”. In central bank language this means that there is still a possibility for the Fed to raise rates on their next meeting and even though this is considered a really far-fetched possibility it is important to keep it in mind since it keeps the Dollar supported.

Yesterday however the Dollar rally seems to have paused again and most instruments managed to recover partially against the US currency. Investors were also focused on the Pound as the release of the latest Retail Sales figures again surprised to the upside. Today the calendar seems kind of light so we wouldn’t expect any fresh developments and price action should be on the light side.

Price action highlights
The Euro drove below the 1.1200 level yesterday but the decline was short-lived and soon a correction started that allowed the currency to climb back above this key level. The momentum that has driven the Euro towards these lows seems to be diminishing and a further correction could be expected today given the lack of any important news or reports pending but it is important to remember that the bias remains to the downside. The trigger level for a correction lies around the 1.1230 area and we could see an extension towards the 1.1300 area if the pullback picks up some short-term momentum.

The Cable printed a new high yesterday and moved briefly above the 1.4650 area but it quickly reversed and settled around the 1.4600 level as the UK currency seemed overbought against the Dollar. The Pound has gained significantly this week and yesterday’s bullish reaction came on the back of stronger Retail Sales figures that keep the bias on the Cable on the bullish side. Today given the lack of any reports or developments we could see some consolidation around the same area but as long as the currency remains above 1.4550 the bias points higher.

Focus of the day
A relatively barren calendar at the end of the week with only tier-3 reports this morning, the Eurozone Current Account and the UK CBI Trends are not considered market-moving by any degree. Later in the day the US Existing Home Sales levels are important to note down but we expect no reaction from the Dollar to these figures.

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